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SMSF Property Investment Strategies Guide

  • Writer: Stacy
    Stacy
  • Oct 2, 2025
  • 3 min read

Navigating the Rules and Maximising Returns


1. Understanding What SMSFs Can Invest In


Self-managed superannuation funds (SMSFs) are permitted to invest in a wide range of assets, including:


  • Listed and unlisted shares

  • Term deposits and cash

  • Managed funds

  • Residential and commercial property

  • Alternative assets (Precious Metals, Crypto etc.)


When it comes to property investment, SMSFs must ensure all investments align with the sole purpose test and the fund’s documented investment strategy. Additionally:


  • SMSFs cannot acquire residential property from a related party (e.g., the member or their relatives), unless the asset is business real property.

  • Any transaction involving a related party (Business real property) must occur at market value and on arm’s length terms to avoid triggering non-arm’s length income (NALI) or breaching other rules.


2. Buying Property with SMSF Cash vs Borrowing (LRBA)


Option 1: Buying Property Outright (With Cash)


An SMSF with sufficient liquidity may purchase an investment property outright. This can:


  • Simplify compliance

  • Avoid loan costs and lender restrictions

  • Retain full rental income for the fund

However, large allocations to a single asset may raise concerns about diversiffication and liquidity, particularly where the fund also pays pensions.


Option 2: Using a Limited Recourse Borrowing Arrangement (LRBA)


An LRBA allows an SMSF to borrow to acquire a single acquirable asset (e.g. property) via a

separate holding trust structure. Key features include:


  • The loan is limited recourse, meaning the lender’s rights are restricted to the asset itself

  • LRBAs must comply with strict SIS Act conditions

  • Repayments must be made from fund resources (rental income or other assets)

  • You can borrow from a 3rd party financier (banking institution) OR related party

  • Related Party loans must meet safe harbour guidelines (e.g. benchmark interest rates and loan terms)


Common Structures:


Structure Type

Description

Direct SMSF ownership

SMSF owns property directly (cash or LRBA)

Holding trust (LRBA)

SMSF borrows under LRBA via bare trust until

loan repaid

Unit trust or company

Complex scenarios (e.g. related unit trust)

must meet specific exemptions


Each structure carries distinct compliance and risk considerations. Professional legal, financial and tax advice should be sought before implementation.


3. Sunshine Coast Property Market – Mid-2025 Update


Here at home - The Sunshine Coast remains a prominent lifestyle and investment region, with data indicating robust long-term growth:


Metric

Value

Median House Price 

$1.055 – $1.056 million

Median Unit Price

$730,000 – $745,000

5-Year House Price Growth

~70% – 76%

Median Weekly Rent (House) 

$750 – $773

Median Weekly Rent (Unit) 

$610 – $614

Gross Yield (Houses)

3.2%

Gross Yield (Units)

~3.9% – 4.0%

Rental Vacancy Rate

~1.1%

Median Days on Market

~37 days


This data reflects strong rental demand, low vacancy, and sustained capital growth, which may appeal to investors focused on income and long-term asset appreciation. However, SMSF trustees must also consider liquidity constraints, exit timing, and regulatory risks when investing in illiquid assets like property.


4. Final Considerations


SMSF property investment can offer benefits such as tax-effective income, long-term capital growth, and strategic control when properly structured and aligned with the fund’s investment strategy.


This approach is not suitable for all trustees. It requires:


  • Strict compliance with SIS regulations

  • Ongoing valuation and documentation

  • Consideration of liquidity, especially in pension phase

  • Comprehensive legal, financial, and SMSF-specific advice

5. Summary: Structure, Strategy and Support


Each SMSF property structure, whether via direct ownership, LRBA with a holding trust, or more complex unit trust arrangements, carry distinct compliance, tax and risk considerations. Decisions made without proper planning may inadvertently trigger breaches, incur penalties, or result in sub-optimal outcomes for members. Sometimes these can’t be ‘undone’.


Having a seasoned professional in your corner, who understands the intricacies of SMSF law can be the difference between success and serious setbacks.


Qualified advice ensures that all investments are appropriately structured, legally compliant, and aligned with the SMSF’s long-term goals and the spirit of the SMSF Act.


Data Sources



Important Information – No Advice Disclaimer

The information contained in this guide is factual in nature and provided for educational purposes only. It does not take into account your objectives, financial situation, or needs. It is not intended to be, and should not be relied upon as, financial product advice or a recommendation in relation to any financial product or service. Before making any financial or investment decision, you should assess whether the information is appropriate to your circumstances and seek advice from a licensed financial adviser, tax agent, or other qualified professional. This material has been prepared in accordance with ASIC regulatory guidance on the provision of factual information.

 
 
 

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